Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points below your existing rate? That may have been true years ago, but with refinancing dropping in cost recently, it's never the wrong time to consider a new loan! A refinance is often worth its cost many times over, factoring in the advantages that come, in addition to a lower interest rate.

Advantages

When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, sometimes significantly. You also may be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage program, enabling you to build your equity quicker.

The Cost

As you probably expect, you will have to pay for your the refinance process. You'll be charged the same kinds of fees as with your existing mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You could offer to pay points (prepaid interest) to attain a lower rate of interest. Your savings on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. Please consult a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.

Another expense that borrowers might take into account is that a reduced interest rate will lower the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at 6233400934.

Ultimately, for most people the amount of up-front costs to refinance are made up very quickly in monthly savings. We'll help you find out which mortgage program is ideal for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing might have on your taxes. Call us at 6233400934 to get started.

Want to know more about refinancing? Call us at 6233400934.

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